Report Exposes The Right-Wing Tag Team Plotting Against Pensions

September 26, 2013

Isaiah J. Poole

News stories around the country have trumpeted a public pension “crisis” in various states, featuring elected officials who insist that these crises justify slashing the retirement benefits of public employees.

What these stories usually don’t say is that conservative activists are manufacturing the perception of a public pension crisis in order to both slash modest retiree benefits and preserve expensive corporate subsidies and tax breaks.

Leading this effort is the Pew Charitable Trusts’ Public Sector Retirement Systems Project and the Laura and John Arnold Foundation. Their role in ginning up the sense of crisis, and in pushing state legislatures to dismantle pension systems that have served workers well for decades and could serve them well for decades more, is exposed in an Institute for America’s Future report released today, “The Plot Against Pensions.”

“This is the story not merely of two nonprofits, nor merely of one set of economic issues; it is a microcosmic tale of how, in the Citizens United age, politically motivated billionaires can quietly implement an ideological agenda in local communities across the country,” the report states.

“Operating in state legislatures far away from the national media spotlight, these billionaires can launder their ideological agenda through seemingly nonpartisan foundations, with devastating legislative consequences for millions of taxpayers and families. And as the battle over America’s retirement proves, it isn’t just the infamous Koch Brothers at work anymore.”

The Laura and John Arnold Foundation is run by conservative political operatives and consultants, and funded by John Arnold, an Enron billionaire. His only major experience with pension management was his role in a company whose collapse destroyed its own workers’ pensions and helped to damage the financial stability of public pension funds across America that held Enron stock.

The Pew retirement project harkens back to Pew’s historical roots in conservative economic causes, which are often overlooked amid the apolitical and nonpartisan reports that the various Pew outlets produce.

Together, they have been working in states across the country to focus the debate over pensions primarily on slashing retiree benefits rather than on raising public revenues. This campaign has played an integral role in states passing legislation that cuts guaranteed retirement income – all while those states preserve more expensive corporate subsidies.

Matt Taibbi in Rolling Stone chronicles what happened in Rhode Island when state treasurer Gina Raimondo rammed pension changes through the state modeled on the Pew-Arnold template. As Taibbi reports, a plan that was hailed as “the most comprehensive pension reform ever implemented” had the net effect of “handing more than $1 billion – 14 percent of the state fund – to hedge funds. … The funds now stood collectively to be paid tens of millions in fees every single year by the already overburdened taxpayers of her ostensibly flat-broke state.”

During a media conference call about the report, Kentucky State Rep. Jim Wayne said that despite promises by Pew and Arnold that their policy changes would make the retirement funds solvent and protect benefits, “in fact, our judgement is that the opposite is true … the unfunded liabilities remain, and the independent actuaries predict that the plan will cost taxpayers an additional $55 million … And now, with this so-called reform, we risk future generations of workers n Kentucky being forced to live in poverty.”

Dean Baker, chief economist with the Center for Economic and Policy Research, said that Arnold and Pew are causing too many state legislators, and some of the general public, to forget that these pensions are “benefits that people worked for” and are contractually entitled to receive. Also, “public pensions are a model for secure retirement … It’s something that we ought to emulate, not something we should destroy,” he said.

The report acknowledges that states and cities have for years been failing to fully fund their annual pension obligations. They have used funds that were supposed to go to pensions to instead finance expensive tax cuts and corporate subsidies. That has helped create a real but manageable pension shortfall. Yet, instead of citing such a shortfall as reason to end expensive tax cuts and subsidies, conservative activists and lawmakers are citing it as a reason to slash retiree benefits.

In fact, the amount states and cities spend on corporate subsidies and so-called tax expenditures is far more than the pension shortfalls they face. According to Pew, public pensions face a 30-year shortfall of $1.38 trillion, or $46 billion on an annual basis. This is dwarfed by the $80 billion a year states and cities spend on corporate subsidies. Yet, conservative activists and lawmakers are citing the pension shortfalls and not the subsidies as the cause of budget squeezes. They are then claiming that cutting retiree benefits is the solution rather than simply rolling back the more expensive tax breaks and subsidies.

The pension “reforms” being pushed by conservative activists would slash retirement income for many pensioners who are not part of the Social Security system. Additionally, the specific reforms they are pushing – whether “cash balance” schemes or 401(k)-style defined contribution plans – are often more expensive and risky for taxpayers than existing pension plans.

The stakes go well beyond the effects of the Pew-Arnold campaign on state and municipal employees. The report warns: “The current campaign to slash public pension benefits has relied on many of the same public relations strategies as President Bush’s earlier campaign to privatize Social Security. In that sense, the campaign against public pensions is an exercise in perfecting methods that manufacture the perception of a crisis – and then result in cuts to guaranteed retirement income. If the state-based crusade against public pensions is successful, it will probably fuel a renewed effort to privatize Social Security.”

Ultimately, as “The Plot Against Pensions” demonstrates, the retirement security of millions of Americans is being jeopardized.

This post was updated to include comments from a media conference call.

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About Isaiah J. Poole

Isaiah J. Poole is communications director of People's Action, and has been the editor of OurFuture.org since 2007. Previously he worked for 25 years in mainstream media, most recently at Congressional Quarterly, where he covered congressional leadership and tracked major bills through Congress. Most of his journalism experience has been in Washington as both a reporter and an editor on topics ranging from presidential politics to pop culture. His work has put him at the front lines of ideological battles between progressives and conservatives. He also served as a founding member of the Washington Association of Black Journalists and the National Lesbian and Gay Journalists Association.